French Stocks and Bonds Plummet Following President Macron's Surprise Election

By Thea Felicity

Jun 10, 2024 10:28 AM EDT

Commemorations Marking The 80th Anniversary Of D-Day Take Place In Normandy — SAINT-LAURENT-SUR-MER, FRANCE - JUNE 6: President of France Emmanuel Macron speaks during the official international ceremony to mark the 80th anniversary of D-Day, at Omaha Beach on June 6, 2024 in Saint-Laurent-sur-Mer, France. Normandy is hosting a variety of events across significant sites such as Pegasus Bridge, Sainte-Mère-Église, and Pointe du Hoc, leading up to the official commemoration of the 80th anniversary of the D-Day landing on June 6.
(Photo : Jordan Pettitt - Pool/Getty Images)

French markets tumbled on Monday, June 10, following President Emmanuel Macron's surprise decision to call a snap election. According to Bloomberg, this decision caused investors to retreat from the nation's securities.

The CAC 40 equity index in Paris dropped as much as 2.4%, with shares in leading French banks falling by up to 9%. Yields on 10-year French bonds surged to their highest level this year, pushing the premium relative to German bonds to the highest since January. The euro also fell to a one-month low.

The CAC 40, a major stock market index in France, fell by as much as 2.4%, indicating a broad sell-off in French stocks.

Additionally, shares in major French banks saw even steeper declines, with some losing up to 9% of their value, while yields on 10-year French government bonds increased sharply, reaching their highest level of the year. Higher yields indicate that investors demand more return for holding these bonds, usually due to increased perceived risk.

At the same time, the euro's value dropped to a one-month low, showing decreased confidence in the European currency, likely influenced by France's political and financial uncertainty.

This latest turndown in French stock and bonds adds to months of market unease over France's increasing debt and recent fiscal struggles, further worsened by a credit downgrade from S&P Global Ratings.

President Macron's Snap Election

Stefan Koopman, senior macro strategist at Rabobank, commented that Macron is taking bold and risky actions by calling a snap election. Still, investors are not as willing to take on such risks.

Macron's move is seen as a strategic gamble to prevent far-right leader Marine Le Pen from gaining more ground ahead of the 2027 presidential election.

However, the decision injects uncertainty into his legislative agenda and ability to appoint a like-minded prime minister.

As the nation gets closer to the two-round election, which is scheduled to start on June 30 and end on July 7, analysts anticipate more volatility.